Why CZ Thinks Dark Pool DEX is What DeFi Needs Right Now

Changpeng "CZ" Zhao, the founder of Binance, is charting a path for the privacy and security of (DeFi) decentralized finance. On Sunday, CZ proposed a permanent decentralized exchange (DEX) "dark pool-style" to counter (MEV) and front-runner mining value attacks in DeFi. "Given the recent events, I think now might be a good time for someone to launch a perp dark pool DEX," Zhao posted on X "I've always been confused by the fact that everyone can see your orders in real-time on the DEX. The problem is worse on the perp DEX where there is liquidation." A solution for the transparency issue of DeFi Perpetual DEX offers perpetual futures contracts, allowing traders to leverage bets on the price of cryptocurrency assets without an expiration date. However, transparency comes at a price: public order books and transactions linked to wallets make participants vulnerable to manipulation. MEV bots exploit pending transactions, leading to slippage, worse prices, and higher transaction costs.

"If others can see your liquidation point, they may try to push the market to liquidate you," CZ said. "Even if you have a billion dollars, others can still team up against you." CZ's DEX will hide orders, positions, and liquidation points using privacy protection technology such as zero-knowledge proofs (ZKP) or similar encryption, only revealing transaction details after settlement. He said: "This leads to increasing depreciation, rising prices, and your costs also increase accordingly." Benefits of organization and technical challenges Kadan Stadelmann, CTO of Komodo Platform, agrees: "CZ really has something in mind here. Such a solution must be trustless, non-custodial, cross-chain, and secure. For example, the non-custodial feature promotes privacy." Stadelmann refers to the demand for advanced cryptography and decentralized mechanisms such as atomic swaps and Hash Time-Locked Contracts (HTLC). These smart contracts allow for cross-chain asset exchanges without the need for intermediaries, with conditions such as time limits to cancel the transaction if the requirements are not met. Some other experts also believe that today's DEXs expose too much: real-time order visibility, order books linked to wallets, and predictable liquidation points. However, this is really bad for serious traders. CZ's post makes a strong argument for the next boundary in DeFi infrastructure. Privacy vs. Untrustworthiness The debate surrounding transparency in DeFi is not new, but CZ's proposal has sparked discussions on how to balance openness with transaction security, especially for organizations concerned about bots. Zhao's dark pool model aims to create a trustless and non-custodial platform where even high-net-worth traders can participate without information leakage. Stadelmann and Shekhawat agree that the first to deploy such a DEX will open up design space for institutional-level DeFi. Conclusion: The call to action from the developer After his proposal, CZ invited developers to collaborate on this idea through ReachMe.io, a paid messaging app he launched in March. This platform helps CZ filter incoming requests in large volumes, which is said to adjust the price of messages over time to manage spam and prioritize serious inquiries.